Financial Honeymoons: Advice For The Engaged, Newlyweds, Old Marrieds And The Divorced

It’s summer, which means weddings for a lot of people and of course I have some advice. Er, my record on marital success is not too good, so I’m going to stick to financial pronouncements here. While planning for wedded bliss, you should also have Plan B: that you may find yourself suddenly single again. Not necessarily divorce, but also losing a spouse to death, long periods apart for work or military service, disability or illness. Okay, maybe that’s too gloomy for summer, but not as bad as having no plan and trying to cope with life’s surprises. So I offer the following for your consideration:

  1. Consider a prenuptial agreement. Yeah, I know it’s anti-romantic. It’s usually suggested by the person with the most dough. “If he/she really loved me, he/she would sign/wouldn’t ask.” Et cetera. Now tell me, do you think it’s important to have homeowner’s insurance? What’s the likelihood that your home would burn down? But you still have the insurance (or you won’t get a mortgage) because the loss would be so catastrophic that it would be hard to recover. Divorce falls into that category, too—ask anyone who’s been through one and is looking at what’s left in their retirement accounts afterwards. When do you think you’ll make fairer, more loving decisions—when you’re planning for a life together or when you’re snarling at each other with dueling attorneys? Contentious divorces can easily cost EACH person $30,000-$50,000. Decide how income and assets (both marital and pre-marital) will be handled, and plan for the impact of childcare on the economic viability of anyone who stays home with the kids. If you never need the agreement, great—burn it at your 50th wedding anniversary. If you do, you’ve saved yourself a lot of money and anxiety in an emotionally difficult time.
  2. A corollary: don’t marry anyone who springs a prenuptial agreement on you a couple of days before the wedding. Really, cancel the ceremony—you now know that you are marrying a person who’s willing to exploit you in a moment of weakness and win by coercion. I guarantee this relationship will not work out, and it will be way cheaper to cancel the hall and eat the cost of the dress or the ring than it will be later, both emotionally and financially. BTW, that coerced prenup will probably not stand anyway, but you can double the costs of the attorneys fighting over it.
  3. Maintain a credit card in your individual name only. If you’re in any kind of crisis—a job loss, disability of the other partner, sudden death or illness, or (guess what?)—it can be really tough to get credit, particularly if you’ve stopped working for any period of time. Hold on to one or two, even if you plan to use a joint account most of the time.
  4. Keep some money of your own. Everyone deserves some discretion and decision making that they don’t have to account for to their spouse. If there’s ever an emergency, you need to be able to lay your hands on some cash. Besides, how are you going to buy your sweetie gifts? As a parent and a daughter, I can tell you there’s real joy in a surprise $20 handed to a child once in a great while. A separate account may be mad money, but it keeps you financially alive.
  5. Both spouses should understand investments. If the most knowledgeable spouse can’t explain the reasons for the investment to the least knowledgeable spouse, well, ahem you really don’t know what you’re talking about. Or you’re off on some harebrained scheme that will land you in a financial planner’s office with nothing to plan with. Or the spouse will be the victim of some ruthless broker—er, financial coach, manager or whatever they’re styling themselves du jour—where your hard earned dollars will be buying the broker that home in Winnetka. Your home, maybe. It’s not cute to act like a dimwit. It’s not cute to act like big Daddy. If you’re old enough to get married, you’re old enough to think about finances and investing. The parent-child act gets old pretty quickly—usually about the time you have your own kids. Force yourself to read about investing. Start simple, but start.
  6. Think a long time before you decide to stay home full-time with the kids. I’m not going to comment on the social and emotional reasons—they’re valid and I DID stay home with my daughter for much of her childhood. But realize that if you do, you are choosing something that will adversely impact your finances for most of the rest of your life. The loss of time in your professional field will mean that when you do return to work, you will be far behind your age group in skills, experience, and network. You may never recoup that loss. Also, the amount of Social Security benefits you earn may take a big hit. Particularly for a parent who stays home for twenty years and maybe had their children after 35, the effect can be devastating, particularly if there is a late in life divorce. You will only be entitled to ½ the former spouse’s benefit, and even with a high earning spouse, that monthly benefit is unlikely to exceed $1,200—giving you a retirement income from Social Security of $14,400. Woof. If you can manage to work part time or freelance, you’ll be far better off. Your spouse and your kids will respect you a lot more, I guarantee.
  7. Keep any inheritance separate. It’s a nightmare in a divorce, but also, each person deserves some separate identity. Also, you may each have some asset protection in the event you get sued for something or need long term care. (This is murky and depends on the individual circumstances).
  8. Talk to a lawyer about how to title house purchases. If either of you moves into a home owned solely by the other, and you split later, it’s lawyers delight. The non-owning spouse may have a claim on some part of the house if improvements were put in or the equity went up during the marriage. On the other hand, a jointly owned home can make a split pretty tough, too. Who gets the house in a divorce probably causes more wrangling than any other issue. On the other hand, if there are kids from a previous marriage and a spouse dies, the surviving spouse might find themselves homeless if title isn’t in order. (Another good reason for a pre-nup).
  9. Update your insurance, account beneficiaries, and get estate documents prepared. Of course you’re going to be happily married forever. Nobody plans to die suddenly, but it happens. Here’s one where “If you really loved me” really does apply.

About the author

Danielle L. Schultz, CFP®, CDFA

Danielle L. Schultz, the principal financial planner of Haven Financial Solutions, is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a NAPFA-registered Financial Advisor, and a Registered Investment Advisor in the State of Illinois. She studied financial planning at Northwestern University’s Certified Financial Planner™ certification program. She also holds a Series 65 license (Registered Investment Advisor Representative) and a CCPS (Certified College Planning Specialist).

She writes a regular column for Better Investing magazine and is currently working on a revision of their mutual funds handbook. In addition to academic training and professional experience, Ms. Schultz has personally managed Social Security, Medicare, retirement and long-term care issues; college funding concerns; and cash flow and transition planning in self-employment and divorce situations. Her social work background gives her an innovative perspective on financial planning issues; for her, financial planning is not only about money, but also a key component in a satisfying and well-lived life.

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